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Capital flows to emerging markets have continued to surge ahead after a strong start to the year, with cross-border portfolio flows in March at their highest monthly level since January 2015 and broad capital flows to China turning positive in February for the first time in almost three years, according to the Institute of International Finance.

The IIF, an industry association, said flows from non-resident investors into EM bonds and equities were an estimated $29.8bn in March, up from $17.2bn in February, reports Jonathan Wheatley in London.

Separately, overall net capital flows to EMs, including trade and other items, turned sharply positive in February, the IIF said, thanks to about $27.5bn recorded for China, breaking a 34-month streak of outflows.

Most of the portfolio flows in March came after the US Federal Reserve raised interest rates on March 15, as investors shrugged off what would normally be a negative signal for EM assets.

Rising US interest rates, and the associated prospect of a stronger US dollar, have in the past prompted investors to sell EM assets in bulk. The so-called taper tantrum of 2013, sparked by just the suggestion that the Fed might rein in its hitherto expansionary monetary policies, caused capital flight that has still not been replaced.

Many analysts feared that this year would start badly for EM flows too, with President Doland Trump in the US promising to reflate the US economy with rate rises and a strong dollar and to impose trade tarrifs and other protectionist measures that would hurt EM exports.

But the Trump administration has so far failed to deliver, EM exports are rising and the Trump trade has been unwinding since early this year. Starved of yield in developed markets, investors have rediscovered an appetite for EM risk. High-yielding EM bonds have done particularly well, with sovereign and corporate issuance hitting new records this year.

Of the cross-border flows in March, $17.6bn went to EM bonds and $12.2bn to equities, the IIF said.